Markets on edge ahead of Ramaphosa address

The rand weakened on Thursday against a broadly stronger dollar as investors prepared for President Cyril Ramaphosa’s state of the nation address (SONA) later in the day.

On equity markets, banks and retailers were among the worst performing blue-chip firms.

At 1502 GMT the rand was 0.54% softer at R13.62 per dollar compared to its close of R13.54 overnight in New York.

With no top-tier economic data due locally, focus shifted to Ramaphosa’s speech, which comes after the market close, with investors looking for clues about the fate of cash-strapped state power firm Eskom.

In a note, Investec economist Annabel Bishop said expectations were for the speech to focus on key state-owned entities which are under financial pressure, with a formal announcement likely on Eskom’s expected restructuring into three separate companies.

She added that the state was likely to provide further financial support to Eskom in the meantime.

“Buying sentiment towards the rand will be heavily influenced by the tone Ramaphosa adopts during the SONA,” FXTM Chief Market Strategist, Hussein Sayed said in a note.

Bonds also weakened, with the yield on the benchmark government issue due in 2026 adding 0.5 basis points to 8.66%.

Stocks dropped, with the Johannesburg Stock Exchange’s top 40 index down 1.34% at 47,672 points, and the broader all-share index slipping 1.26% to 53,888 points.

Truworths lead the declines, down 4.6%, with TFG (The Foschini Group), pharmacist Clicks, Nedbank and Woolworths following behind it.

Confidence in firms exposed to South African consumers – whose budgets are tight in a lagging economy – dipped after a series of weak trading updates from big retailers in recent weeks.

Meanwhile, Clover Industries regained some of the ground lost earlier when a minority partner in a consortium that offered to buy the dairy firm said it was reviewing its role in the deal.

Clover shares fell almost 10% on the news, but closed just 4.13% down.